Seoul bind by US sanctions defer payment to Iranian tycoon over ISD suit

[Graphics by Song Ji-yoon]

South Korea finds itself in a conundrum as it still needs to fulfill reparation obligation to an Iranian tycoon while bound to the commitment to U.S.-led sanctions that have been blamed for the Iranian seizure of a Korean flagged oil tanker.

According to multiple sources from the financial industry on Wednesday, the Korean government has been in talks with Iran¡¯s Dayyani family over 73 billion won ($67.2 million) worth compensation. The two parties have been in talks after international ruling a year ago ordering Korea recompense 73 billion won to the Iranian home appliance manufacturer, citing fault by Korean creditors in the process of selling Daewoo Electronics in 2010. The compensation – which includes contract deposit and interest – has not been made for over a year.

Seoul has not been able to execute the obligation due to U.S.¡¯s sanctions against Iran that ban U.S. dollar capital transfers to Iran. Interest surcharge would grow upon deferment.

The only way for Korea to avoid going against the sanctions would be to pay in a currency other than U.S. dollar, but Dayyani wants payment only in greenback

In April, 2010, Dayyani sought to take over Daewoo Electronics through its Singaporean subsidiary D&A but failed to complete the deal. The Iranian company had paid creditors upfront contract fee of 57.8 billion won but Daewoo Electronics creditors led by state-run Korea Asset Management Corp. (KAMCO) canceled the contract arguing insufficient letter of commitment.

Dayyani asked KAMCO to return the contract deposit of 57.8 billion won but was rejected and later raised an investor-state dispute against the Seoul government claiming 93.5 billion won. The tribunal ruled in favor of Dayyani, which prompted Korea to raise an appeal with the High Court of Justice in England but was denied in December, 2019.

The 2010 ISD dispute issue is raised after Tehran blamed Seoul for causing the seizure of a Korean oil vessel in the Gulf War for freezing $7 billion worth Iranian funds.

[¨Ï Maeil Business Newspaper & mk.co.kr, All rights reserved]